"No one in the Vanuatu government has ever talked about a Chinese military base in Vanuatu of any sort," Regenvanu told the Australian Broadcasting Corp.

"We are a non-aligned country. We are not interested in militarisation, we are just not interested in any sort of military base in our country."

In Beijing, China's defence ministry said the Fairfax report "completely did not accord with the facts", while a foreign ministry spokesman described it as "fake news".

Fairfax said Chinese naval ships would dock to be serviced, refuelled and restocked at a Vanuatu port, with the agreement eventually leading to a full military base.

"We would view with great concern the establishment of any foreign military bases in those Pacific island countries and neighbours of ours," Australian Prime Minister Malcolm Turnbull told reporters in Brisbane.

Vanuatu, around 2,000 km (1,200 miles) east of northern Australia, was home to a key U.S. Navy base during World War Two that helped beat back the Japanese army as it advanced through the Pacific towards Australia.

Any future naval or air base in Vanuatu would "give China a foothold for operations to coerce Australia, outflank the U.S. and its base on U.S. territory at Guam, and collect intelligence in a regional security crisis," Rory Medcalf, head of the National Security College at the Australian National University, said in a report for the Lowy Institute think tank in Sydney.

China opened its first overseas military base in August 2017 in Djibouti on the Horn of Africa. Beijing describes it as a logistics facility.

Djibouti's position on the northwestern edge of the Indian Ocean has fuelled worry in India that it would become another of China's "string of pearls" military alliances and assets ringing India, including Bangladesh, Myanmar and Sri Lanka.

China has also become increasingly active in the South Pacific, undertaking infrastructure projects and providing aid and funding to small, developing island nations.

That has stoked fears that Australia's long-time influence there is being eroded.

"It is a fact that China is engaging in infrastructure investment activities around the world," Bishop told Australian Broadcasting Corporation radio.

"I remain confident that Australia is Vanuatu's strategic partner of choice," she said.

China has also faced criticism over its activities in the disputed South China Sea, where it has been building artificial islands on reefs, some with ports and airstrips. (Reporting by Colin Packham; Additional reporting by Christian Shepherd in Beijing; Editing by Lincoln Feast and Clarence Fernandez)